Representative Alan Grayson of Florida has asked the Florida Supreme Court to halt all foreclosures in the state in light of an investigation by its attorney general into allegations of pervasive foreclosure fraud by so-called “foreclosure mills”.

I am disturbed by the increasing reports of predatory ‘foreclosure mills’ in Florida. The New York Times and Mother Jones have both recently reported on the rampant and widespread practices of document fraud and forgery involved in mortgage assignments. My staff has spoken with multiple foreclosure specialists and attorneys in Florida who confirm these reports.

Three foreclosure mills – the Law Offices of Marshall C. Watson, Shapiro & Fishman, and the Law Offices of David J. Stern – constitute roughly 80% of all foreclosure proceedings in the state of Florida. All are under investigation by Attorney General Bill McCollum. If the reports I am hearing are true, the illegal foreclosures taking place represent the largest seizure of private property ever attempted by banks and government entities. This is lawlessness.

I respectfully request that you abate all foreclosures involving these firms until the Attorney General of the state of Florida has finished his investigations of those firms for document fraud.

I have included a court order, in which Chase, WAMU, and Shapiro and Fishman are excoriated by a judge for document fraud on the court. In this case, Chase attempted to foreclose on a home, when the mortgage note was actually owned by Fannie Mae.

Taking someone’s home should not be done lightly. And it should certainly be done in accordance with the law.

29 comments

First, let me say Alan Grayson is a hero. We need more like him. Secondly, when will the average citizen catch a break from the predators? These banks are disgusting! Whenever someone tries to sort through the muck to bring these criminals under a semblance of control, they unleash the zombie teabaggers to cry socialism. Those racist troglodytes should put down the Kool-Aid and realize it’s the heavy-handed corporate “free market” control of our government destroying us and not some make believe Marxist boogie man.

Big corps and right wing interests are dumping tons of money into his district to run utterly false ads against him. One funded by Big Pharma is saying Grayson will cut Medicare, for instance. And all most people see is the local press, which is falling in line completely with the ad spending.

FNMAE/FHLMC doesn’t foreclose on mortgages anymore than they collect mortgage payments or handle escrow accounts associated with mortgages notes they hold. All this is done by servicing companies who get paid a small percentage each month for the loans they service. FNMAE/FHLMC are merely clearing houses for the resale of mortgage notes and don’t have the manpower to foreclose on the mortgages they own so they contact this out through the servicing companies. What needs to change is the companies who sold these bad notes (A lot of which no longer exist) need to pay the consequences for all of these bad loans that they were complicit in creating and selling FNMAE/FHLMC that defaulted. They also need to be sharing in some of the losses on these bad loans they originated and resold. Then again, these loans were underwritten according to guidelines as set forth by politicians who were trying to keep the economy afloat through the real estate market. The only way we are going to have better loans written is when all the risk can’t be transferred to FNMAE/FHLMC and then ultimately assumed by the citizens (government) who having to bail them out. Loan origination guidelines need to seriously be revamped after this debacle and mortgage companies/banks need to be held more accountable for the risk and costs associated with these loans when they default. There has to be more accountability and the liberal politicians who wanted everybody and anybody to able to get a loan need to be restricted to oversight of the quality of the loans being created and not so much the quantity. But I think Chase may have just been playing a role of servicer just like so many other mortgage companies and banks have to do in enforcing the provisions of the mortgage agreement and note. If someone doesn’t feel obligated to pay their mortgage note because their house is upside down that is their prerogative but after 6-12-18 months they better expect to be foreclosed upon. I work for an enormous servicing company that is in the midst of ramping up 5 centers with thousands of employees to expedite foreclosure and short sale proceedings. They are so overwhelmed and so far behind that that it has reached a critical point and there will now probably be more foreclosures filed over the next twelve months that have been filed in the last 2-3 years. This thing is far from over and you sooner or later you have to couple this with the rates rising on all of the adjustable rate mortgages on homes that won’t be able to refinance because the property values are going to be low for years to come. And only now are is the over abundance of home going to be exacerbated by all the baby boomers downsizing or being forced to sell at a sacrifice or just letting the property go back to the bank when they can’t afford the home on their retirement income or health issues force them to move out. We have a long, long, long way to go before the housing industry will fully recover from this.

“In this case, Chase attempted to foreclose on a home, when the mortgage note was actually owned by Fannie Mae.”

That seems to me to go beyond mere “document fraud” where perhaps a lender dots a few i’s and crosses a few t’s that should have been done in the beginning, after the fact. Here we’re talking an attempt at outright theft, and given the dollar amount, almost certainly a felony. If the allegations are true, people need to be in jail.

There is a tree that shouldn’t be lost in the forest of overly-broad suggestions of rottenness. This is a very particular rottenness – potentially and probably falsified affidavits.

Certain parts of the document process can and will be done by mills. But this is particularly bad one to do that way if it is what I think it is.

It is not the least bit controversial for courts to get very upset about sworn statements that are made falsely, and to the extent it is a systemic situation, exposure will shake up practice in this area. It’s affect is going to be mostly retroactive rather than prospective. No new foreclosure should need a falsified affidavit, it’s just going to cost more to do an actual first hand statement. Certain flunkies, their supervisors, and maybe their fulnky default servicing companies will go down, but they are the low-cost flunkies that dot the system.

That said, Grayson needs to get the issue right, and his letter did not strike me as being careful enough when he uses non-specific “document fraud” instead of a more particularized example. Well, at least someone is talking moratorium.

It’s a bit presumptuous to criticize Grayson when you are not on top of the state of play in Florida. You mistakenly assume the affidavit fraud is the probably only type. Dead wrong. There have been signature forgeries, documents (allonges) created out of whole cloth. The much bigger issue than the affidavit is the efforts to create the proper chain of endorsement for the notes, as called for by the PSA. But whoops! Under NY Trust law (very rigid, not standard UCC) which governs all the RMBS trusts, and REMIC rules, you can’t fix this ex post facto (normally you can assign a note freely, this would be no biggie, but the terms of the PSA stand in the way).

So there is a reason he was broad with his language. There are multiple forms of document fraud afoot.

And this isn’t a matter of “just costing more”. If you screwed up on getting the note into the trust, you really have no obvious solution. The trust is not a real party in interest in the note. I’ve raised this with a lot people (securitization experts, people who have a vested interest in believing this can be straightened out), there are no simple or even not simple fixes. Why do you think LAWYERS would be resorting to document forgeries if there were remedies?

I agree about the “note into the trust problem,” I think. Everything else is irrelevant if this issue blows up. But it’s also a hellavu a lot more complictated and it’s very difficult to get a judge to give it the time of day. As for lost notes, there is a process for dealing with that, too.

Affidavit falsification, on the other hand, is an issue that every judge and litigator in the US gets. And effectively showing an assembly-line of falsication stops virtually every case dead and will open up the process to the much tougher-to-grasp issues.

But you are right, I don’t know much about Florida other than what I read from Florida attorneys. But I do know that falsified affidavits are bad everywhere.

You guys are right. Let the losers who stopped paying their mortgages keep the house for free with no recourse because some paperwork got messeed up. Let the investors who were foolish enough to inveest in rmbs lose every penny they invested. The losers should get their homes free and clear because the trust paperwork wasn’t properly endorsed in 2004. Those predators who lent the money for the american dream deserve to lose it all and the underwater homeowner fb gets his home free and clear. Uh-huh.

The investors should sue the a$$es off the clowns that packaged the deal, sold them, and were “managing” them.

Investors got schnookered. Home buyers got schnookered. The banksters running the scam got money for a bunged up deal and a big fat bailout from the taxpayer when them and their buddies scams took the whole market down.

Who said that people should be able to keep their house for free if the note (and clear title therto) can’t be produced? The note presumably still exists somewhere (or, if it has been lost, title should be able to be traced to someone, although if things are really messed up, not necessarily to its correct owner) and that note should still be enforcable. If the person who’s trying to foreclose can’t produce the note, the person who’s losing her/his home would still legally owe the money to whomever holds the note even after losing the house. Why should they lose their house and still be on the hook for the note?

What people are saying is that if you borrowed money from A and gave A an IOU but then A sold it to B who sold it to C who put it into a trust with a lot of other notes (and then sold interests in that pool to a lot of other investors), you (the borrower) have no way of knowing to whom you actually owe money unless s/he can produce the IOU. You shouldn’t have to pay the money to A or B even if they lie and say that they lost the IOU (or produce fake documentation).

Unless someone can produce the real IOU, you shouldn’t have to pay because you don’t know if you really owe money to that person or if someone else (D) might come along later and prove that s/he has the real IOU and you owe that money to D. Why should the homebuyer have to pay A, B, or anyone else who doesn’t have the IOU? And why should D, the real owner of the IOU, lose her/his security interest (the foreclosed upon home) because A, B, or C lied and said that they owned the IOU when they didn’t? (I’m not saying that Chase, GMAC, WaMU, or others lied about actually being the parties to whom the IOU payments are owed, although their apparent lies about other things don’t give me confidence that they didn’t. I’m saying that, unless they can show that they hold the note, you can’t know whether they are the actual debtholder or whether their sloppy recordkeeping practices may have failed to record, in a usable way, whether they transferred the note to someone else or whether the party who claimed to transfer it to them actually owned the note.)

This seems like a potential problem for homeowners in both judicial and non-judicial foreclosure states (even if you don’t buy your home via foreclosure) because if you can’t determine the real IOU holder, it could create a cloud on your title.

If someone invested in an RMBS that can’t produce the required documentation, they should be able to go after (via negotiation or, if that fails, lawsuit) whomever messed up and failed to put the note(s) into the trust (and obtain the required documentation for clear chain of title to the note). That’s very basic and failure to do so is almost inconceivably negligent (although apparently relatively widespread).

I know you all like what Grayson’s saying, but since when is it OK for a Congressman to write a letter to a judge demanding that he do something? Unilateral contacts with a court without notice to, or in the absence of representation by the other party is highly improper. As an attorney Grayson knows that; as a publicity hound in a tight election he doesn’t care.

The proper way to get in front of a judge is to file a lawsuit.

Well, you say, this situation is too important to get all fussy about the rules. But, isn’t the absence of fussiness about rules the cause for the original complaint.

Are you serious? That is such a pansy complaint. You don’t like a politician making a statement on the issue to a judge?

Politicians do this sort of thing all of the time. I’m a lawyer and I don’t see anything improper – Grayson isn’t a party to the case, nor is any case specifically referenced. If this is all Grayson’s political opponents can muster, he doesn’t much to worry about.

“You guys are right. Let the losers who stopped paying their mortgages keep the house for free with no recourse because some paperwork got messeed up. Let the investors who were foolish enough to inveest in rmbs lose every penny they invested. The losers should get their homes free and clear because the trust paperwork wasn’t properly endorsed in 2004. Those predators who lent the money for the american dream deserve to lose it all and the underwater homeowner fb gets his home free and clear. Uh-huh.”

I know the people at this page are ridiculous. Don’t they realize that bankers are big-hearted, but lovably maladroit folks who are always screwing up on the little bureaucratic details – while those nasty, clever, scheming borrowers work night in day, in tandem with their extensive legal departments, figuring out ways to screw the poor bankers over. Can’t we just agree that the bank *deserves* the home and ignore all those pesky laws about contracts and securities?

Lol Charlie: The overleveraged homebuyers were not the only suckers in this scam..:)

There was never any intent to create viable investments here. Quite the opposite. They recruited people who were obviously not creditworthy to take the mortgages, then they suckered people like you to hold the paper (or think you were holding the paper). The closest thing to a real asset involved, was your money (and we know that isn’t worth the paper it is printed on). There were three bags in the game. Both you and the home buyer were handed the empty ones. The third with a little bit of cash in it mysteriously disapeared off the table. If by some miracle this is resolved over the coming Decades, you will still get nothing because lawyer and accountant fees will eat all of it.

Well..One more brick in the wall of evidence suggesting that the Tarp and Bailout funds would have been better spent to creat a reset of all residential mortages.

I’m not an American, but I shudder at the speed with which you are approaching anarchy. American Institutions, both financial and political are riddled with graft and corruption. There is nolonger any reason to trust anyone.

I know most of the arguments against the bailout of freckless private citizens with their liars loans etc. They amount to nothing more than excuses for the entrapment of naive suckers. In the guise of providing fiscal education to those who did not learn it in school or at home, the American voter has endorsed the destruction of two generations of Yuppies and the gutting of the National Treasury.

in america truth and justice are asymmetrical. money is truth and justice. period. nothing else matters except the think tank lies that relevel the playing field in the minds of those hundreds of millions brainwashed since birth to abhor economic realities.

This is what Mr. Obama needs to do, get together with all the governors and attorney generals and sue the banksters that robbed us all blind.

these people created a double headed pyramid scheme and not it is unraveling. If I had done this with my co workers I would be in jail already. But since these crooks have been doing it under the guises of the big banks and powerful corrupt law firms, it has been business as usual until now.

Wake up America, capitalism rules, however there are laws and rules to follow. these thieves did not do that. They defrauded the investors, bet against their own clients interests and now they are in the business of stealing what legally does not belong to them. Most MBS trusts have been dissolved or were never even real. Most of these mortgages are unsecured debts and unenforceable.

Arrest the Banksters along will the politicians for Fraud and Treason … Then HANG EM HIGH for 30 dsys while we refill the offices with people will step up to the plate, and institute a real US Dollar backed by Platinum, Gold and Silver.